Thursday, September 14, 2006

Credit Suisse - XM and Sirius Merger Talk

September 14, 2006

Today Credit Suisse published a report on XMSR that upgraded the stock, and took an in depth look at the possibility of a buy-out or merger for XM.

The report outlined various scenarios for a Clear Channel and XMSR hook-up, as well as some scenarios for a Sirius and XM marriage.

According to the models, both scenarios would benefit XM shareholders, but a Sirius and XM merger would bring shareholders results much more quickly.

The concepts created by Credit Suisse all show shareholder appreciation through a premium being paid for XM stock ($18 vs. the current trading price). In the Sirius and XM scenarios, the valuation of the combined companies would also offer additional benefits to shareholders of both Sirius and XM. Because the valuation of the combined entity would be bigger, both equities would grab a virtually instant premium.

While there are many who say that the merger would never be allowed, there are some very prominent consultants who feel that it is quite possible. The Credit Suisse report actually feels that there is a better than 50% chance that it could pass regulators.

With the publication of this report, the subject of a merger will likely begin to become a topic of discussion once again. In our opinion, another possible merger would also bring this subject to the forefront. There is a lot of talk on the street about Dish and Direct TV hooking up with the company being called Direct TV, and being run by Charlie Ergen. Should that merger pass regulatory muster, the speculation in the satellite radio sector would blossom quickly.

What does all of this mean? Well, for the moment, it is giving the sector a nice boost. XM is seeing direct benefits because all of these scenarios take into consideration that a premium would be paid for XM shares.

Time will tell.

9/14/2006 12:26:00 PM

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